Wolfspeed Stock Crashes On Bankruptcy Warning, Missed Earnings, And Wall Street Downgrades

Wolfspeed (WOLF) stock plummeted 28% in midday trade on Friday after the company said it expects to add ‘going concern’ language to its upcoming 10Q filing with the U.S. Securities and Exchange Commission (SEC) during its third-quarter earnings call on Thursday.

‘Going concern’ language in a 10-Q refers to a statement by the company expressing doubt about its ability to continue operating for the next 12 months without liquidating assets or seeking Chapter 11 bankruptcy protection.

Simply put, it’s a red flag for investors and creditors. While it does not mean immediate bankruptcy or even that it is certain, it signals financial distress.

"As we consider alternatives as it relates to these negotiations... we expect to receive approximately $600 million of 48D cash tax refunds during the fiscal year 2026, further improving our cash position,” the company said. 

As part of its lender negotiations, Wolfspeed explained it may elect to pursue either in-court or out-of-court options.

Due to its contemplation of an in-court option, ‘going concern’ language in the footnotes to the financial statements of the upcoming Form 10-Q is a requirement. 

For the third quarter (Q3), the company reported a loss of $1.86 per share, which was higher than Wall Street’s expected loss of $1.62 per share, according to Koyfin data.

Its revenue came in at $185 million, below the analysts’ estimate of $186 million.

Citi downgraded Wolfspeed to ‘Sell’ from ‘Neutral’ with a price target of $3, down from $7, as per TheFly. The brokerage flagged risks like the lack of guidance for the June quarter and the fact that management did not take questions during the earnings call. 

It believes the company “faces significant financial challenges in a sluggish macro environment with financial losses, high leverage, and CHIPS Act funding challenges underpinning doubts over going concern.”

JP Morgan also downgraded the stock to ‘Underweight’ from ‘Neutral’ without a price target following the Q3 earnings report. 

The brokerage said that the uncertain macro environment, higher competition, and significant changes in the management team “create a challenging path” for Wolfspeed to achieve its target of generating positive operating cash flow in the fiscal year 2026. 

Wolfspeed’s stock is down more than 50% year-to-date and has fallen more than 86% over the past 12 months. 

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